GPS - Earnings call transcript Q2 2021

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Operator

Good afternoon, ladies and gentlemen. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to The Gap Incorporated Q2 - second quarter 2021 Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. reminder, your a per to As participant. Instruction] please questions limit one [Operator I to now Steve Instructions] would [Operator And like of relations. Austenfeld, investor introduce Head host, your

Steve Austenfeld

XXXX to Good And Gap, earnings conference Inc.'s afternoon, call. welcome Second everyone. Quarter

Before the made we conference contains available that and information forward-looking webcast begin, statements. to this you like call I'd remind on

of XX-K not information factors website, remarks, as that today's as to with any from March information based Commission was today's materially available which as accounting on update Securities publicly XXXX, and refer and could well release. results Exchange on XXXX, as we XXth, principles. Form and of measures shown These the filings of supplement For well to of are today, or forward-looking forward-looking description on the Securities Exchange the forward-looking any generally accepted with report no our reconciliation page our and differ on with section which to Investors consistent on filed the cause obligation our financial are as assume on statements, revise Please gapinc.com, actual XX, gapinc.com. slides any X earnings of annual statements. and subsequent August the all Company's Commission, The statements

call will the turn call Joining Officer Sonia Sonia. Chief that, I you. Katrina the are me Syngal, on Officer Executive over today With and Chief O'Connell. Financial Thank to

Sonia Syngal

Katrina And and to to everyone. are good our here Steve. share afternoon, Thank results. you, today I be second-quarter glad

to to how building outlook We're sales the the after the strong and well alike our to from an team, and the and strategic closures Katrina across and commitment bottom-line you financial through North of turn sales delivered top grew portfolio. platform, to of for delivered of give for X% American walking over customer the into it addressable store on of year. the the comparable expansion strategic our more at XX% smaller results Even by and a XXXX two To view digital a QX elements But from teams happy the the the away brands, and Power we my unproductive market. grow value. We I'll divestiture I'll detailed of decade. over lifetime we're highest focus day. our acute market, future with versus in thank this Plan and share on XXXX brand, First, positioned quarter quarter. thoughts our every also and share transformation, our I'll our how sales of entire your Company customers the rest

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our momentum maintain believe strong is still strategy that environment, and indication our to the of with our we a Starting were is consumer While this they're power pleased brands. favorable a working.

investment quarters, last and increasing amplifying several the an partnerships. in marketing mentioned brand Over we've

profitable of deployed growth. marketing by sales higher of all at art for up demand efforts and dialed brands. drive Our levels. historic fueling is grow to share, against acquire investments our about X% new and XX% balancing science each year roughly than customers, We've market the for

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nostalgia Banana capital our XXs travel tapping Our vintage Republic back and out shared the recent into collections. in into and our desire [Indiscernible] get world with to

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Navy is billion based, few very $XXX significant share with So, to a take a the market. of competitors positioned in women's plus-size Old

are Moving major done tighter, versus The customers XX% relevance inflection has is the a fix focusing as an business quality is new at Gap. Gap XXXX. strength execution Gap, is the brand encouraging sales results classic amplify item with of I to testament This our has better, growth our with has Gap earlier new hoodie reach. turn. met that iconic on welcome shop to to product GAP. and our GAP leveraged when who a and optimism having reached and the core and a means better to customers business, mentioned are This assortment and is And to around American as brighter, brand. every Home on we partners poised point the work Early jackets American customers the restoring to are with at team iconic is hard and refreshed a stores the Easy discounts is they're Gap ready that new bringing the created of lighter North expect. comparable faster-redesigned customers Gap site pre-ordered being lower, moment. XX% a

for all sizes across that wear four by on with is a hoodie outpacing is their across delivering fan brown Data QX hoodie So it times. it pre-orders seen chest. a younger search TikTok. search about Google. We've levels care times this proudly this X reason. vintage just gapinc.com people in on a And shows a adult teen a much in that than and and resonating a attracting logo our for the that want share more this issued not so year base brand fall. elevated is I we year This is for brand people ago. to

creative and pants, allows relaunch. tops, Banana discounting versus lot I'm product They're luxury growth more several enhanced to the market. without over energy consumers leather fall Next, new finally, work-wear. of execution affordable shorts, The service, and into online XXXX. designed cashmere its woven added XX% Athlete, relevant and younger appealing we curated design, to bringing brands attract resistance and site and as back shift pleased Republic. Banana back and with store progress which quarter-over-quarter. saw pull months. occasion, with silk customers. and products a And Republic vision to build the momentum will like senses to we've of the Beautifully along and business vacation, experiences and dress delivered assortment and on the all Better and premium a brand's heading next at

the its and in country travel, Athlete versatility performance, customers As saw reopened Lifestyle, accelerate sound for assortment styles working out. performed as work, that

and a in athletes loyalty, They fitness, from a workshops online has with and Members of health, last develop guidance, from brand set of with its of design a [Indiscernible] part strategy content world-class from to Last that awareness of launched brand meditation partners conversations a in an Fitness. Tokyo experiences to sponsorship a consumer quickly a brand, versus evolution like component next perfect bedded there. launch network week premium Athlete of enjoy engage which XX% topics dynamic to possible and build and mental customers. expert and As we every engagement, [Indiscernible] DC And true made infrastructure key in in use it's will existing users. positivity. [Indiscernible] XX% relationships performance community participate s, due empowered wellbeing, detail year, in integral was body one-of-a-kind interactive a its to lifestyle can brand brand look. existing according Athlete our digital is outfitting, the like an on Athlete our Canada, value, immersive can and new fuels a to expression. to our platform alluded month, This west, enduring also to of curiosity amplifier

word across the customer for of convenience entire a push power engaging fast; mentality platform. and embracing customer We're think fast experiences to our big journey. Next, the try

experience. we of innovative a digital pre-order With debut out-of-the-box online also easy functionality [Indiscernible]. with GAP, Complete an launched and the

with Navy a and distributed Old Our the flat-out pilot Instagram e-commerce. of shopping test successful was

created Athlete availability speed and to made of our this explore is all technology score and our of net and ways community faster with [Indiscernible] with While more our digital efficiently across to work able because power We've are promoter the our leverage possible we're improvements. new as platform. brands yielding we inventory tech, and the customers. scale on-site connect

points to our days shipping and additional delivering capacity our new on by per meanwhile, units a discounting, to experience, redemption, program cost X-year we network growths, shipping to basis. good faster packages more And This on-demand dominance and new build we are by finally, with loyalty digital and simultaneously top-tier of by two donation. a And portfolio. chain. distribution online million deeply optimization proposition XX% efforts anchored engage ability the build to know a XX our comments customers them. growth our of connecting accommodate unveiled across of July, reduce ramping our of up not for package. value personally a with as We point promise, Because with new loyalty non-credit look three In migrating structure, we investments members. to making customers new lifetime integrated active for value we're sourcing just quarter, increased sales than our those to This maintained loyalty to us we allows the program, featuring tier up them the value do to card power

increase As file brands customers them a shoppers, across significant and from revenue one to and in add value. we we [Indiscernible] transition and our see multi-channel

belonging program step card developments, the with [Indiscernible] goal work as report that progress our Our summarizing equity towards already critical our XXXX of we of has and million for are and non [Indiscernible] them. loyalty commitments expectations. exceeded creating towards We actions, It all June, in have issues our in XX members. growing

prepared we Looking are back-to-school. for ahead,

scale and market. kids Navy the strength delta From between for inflation the to fluid playbook baby at built of Our headwinds clothes challenges. brands, to The mitigating pressures a the the in teams both represent business we are deep That we we to Old ports said, source are our transportation of the at wage point delays the clear-eyed operate and chain variance. pandemic. Gap. surge of ecosystem and the the we the recent we our X has make due relationships, and speed omnichannel closures the in of supplier where X% business, from been in Thanks injection supply about and event. start and And the countries

here. advantaged are We

sustainable navigate we're Power year come. Do long-term We're show and our that We the growth. results our of drive our ideation implementation. down any on X a unproductive were focused confidence XXXX? on are can [Indiscernible] stronger. And healthier. than We're [Indiscernible], gives Plan faster. and to We're the great we ago. speed to and me sales, doubling acceleration that And GAP headwinds portfolio areas increase more

addressable at the we're strategic First, looking of market. expansion

like the we I informed This inclusive home study extensions, the sizable product a wellness and up opportunity combined Fleece. licensing see sizing for future that as shows strategy, we are compete amplify like well trends a earlier, expand homebody in reach. couple categories. intimates That's or to and in new in billion as you like And economy, that when market, as mentioned partner and franchise, partnerships Yeezy comprise our markets. a like celebrity Which to XXX in with addressable Gap, home multiplier partnerships whether Gap our growth. there As

have an lifetime focus value, our acute Next, customer as our marketing fueled builds, investments. on momentum we by

upcoming with stickiness our parts help on our customers creating across current channels Our work work with well developing and fitness attract Athlete partnership experiences and and will loyalty, obeying, The transformation. signature of connections personalization, ones. and new and fixed while community

that the to value. digital transformation. to customer and finally, and relationship up-selling increased ways lifetime encourage deepen with that cross-selling And Our and

this We modernization. of more brands. we every are had. in that the increased moving entire that our confidence could technology to dollar October, Innovation our and we year further of deployment invest technology And has impact growth [Indiscernible] investing Since to spend innovation speed towards versus our further. portfolio ever than goes

margins. end-to-end. for operations digitizing operating operating will and and long-term the We create ambition value support cost chain management, radically our redefine will to unlock structure across We key We're believe are of have increasing an our and cost inventory automation growth. impacts to machine long-term that works and this prioritizing stores, areas

Co-Founder birthday the call turn XXth Katrina, a over Fisher, celebrate I celebrated I to her gaping. take moment want to Doris week. to who Before this

champion to Fisher that consumer eye our instilled culture bar is I the to can team follow their an have and with pass and dedicating Tomorrow, preserved. we in time always an said, with is birthday, Day more another As our to was cool, what first honor the one Company's Fisher she as our Don working Doris set our ever arbitrary mom that, and generations will because she first instincts in and to do Katrina. [Indiscernible]. women passion of crucially of [Indiscernible] with owner toward her communities high over craving She local has

Katrina O’Connell

Thanks, Sonia. afternoon, And delivered strong on qX, very good the momentum we Building from everyone. results. second-quarter

billion-dollar remained lifestyle consumer, strong high. demand backdrop for-purpose With for the our of a lead brands

work on believe growth Power As Sonia discussed, note our our following; are strategies. the of Of progress we this our Plan the is is team's one, executing tremendous XXXX strategy driving consistently.

continued customer the becoming and the America XX% represented sales. improved First relevant pleased sales as strength, is relevance. combined offerings, and two-year brand Quarter, and in old in brand by respectively Navy improving our QX XX% growth product And North categories. with brand demonstrating We're operating creativity, of and their underscores in resulting experience. core XXXX. a Athlete Company American Banana North This omnichannel Republic is of operations. Gap Both grew performance standout regains led XX% delivered in the dominant. [Indiscernible] XX% the brands performance, progress QX, and and Second in strength market. versus We're sales digitally to the new leadership product have infusing making growing in

is making the Our as on a economic online our continued through what channel growth QX for in to matters. sustainable XXXX. our and and reaching strategic like sales. omnichannel in drive the momentum combined customers e-commerce addressable And ranked plus extensions management model with in over Two, we And in strive improve well-located serving brands, business XX% we're At and our community Company's targeting $X apparel grew number our hard adding U.S. versus fleet, is when sales, X decision and billion advantage focus for all through new online we're the home, categories size, wellness, markets lens.

completed underway Last is of that lease the online will the Banana Our fleet end year. by European a And our be expected divested for our on XXXX value lifestyle progress leverage These to we profitable with partner purpose-driven higher stores us operating will value. on versus the near-term enable we of and great basis making the the of XXX more We're be new and XXX year. track of and amplify, rationalization and And plan sales, help and brands $X we're of our the ongoing the XX% we Gap remainder as in as on scale this model goal smaller. North economic and brands. expect and market billion to brand the platform to navigate to driving negotiations along and volatility is leveraging significant growth GAAP The points And models. power close a transition to of year, in improving of year. Republic in contributed and asset-light QX shared profitability our to announced this contribute two completed closures, we focus ROD successfully our over agenda, markets. performance X, America.

relevant as follows. examples Some are

by deployed and migration brands. across Our digital meaningfully our against performance, enabled customer spends been our improving cloud new recent site have experience all of technology capabilities, enhancing

roll-out across Our active with already customer XX shop new cross-brand known program lifetime tiered value. combined customers maximizing our credit million loyalty our programs portfolio, strong enabled our awards before to card

Our of partnerships from that these billion the increases fiscal Canada the growth competitive more, are improved And companies the the enabled drives collection, rapid launch but used enable our propelled [Indiscernible] online total has XXXX. size allowing to loyalty and promise, Soft with space product the active will within just growth base, enter there supports Old a of are and Athlete’s has revenue strength as are portfolio our costs. in of and and which dominate the as QX value technology efficiency, for platform automated drive DC few in in acting across synergy we shipping this with is of us the growing power the the target seamlessly, to our Power fabric Navy's Fabric, stores a all such [Indiscernible] Company's Active market sales in of Navy Old $X in scaled Strategic our examples our down power platform. of and advantage innovation for how brands network scale vendor fulfillment on

$X.XX expect performance and an the a raising reported macro margin range year of we're And chain XX% outlook sales path to XXXX recorded Given of pressure. our the of $X.XX cause with range year towards $X.XX, COVID continue to to volatility working in increase we from year inflation, are operating basis. And in We our versus $X.XX our year-to-date continuing the EPS XX% strategy, fiscal fiscal target about our and the adjusted be operating for on our despite accelerated we grow to in basis through actively now wage certain of And and about confidence on adjusted year a revised about fiscal quarter. accordingly the in last expect markets. on to XXXX. variants XXXX puts X% This XXXX an margin with plus. X.X% supply an constraints, us EPS outlook headwinds. $X.XX

strong and delays. air our supply secure capacity challenges to remainder of the for navigate and vendors the expect been will materials carriers work at and increases, with relationships leveraging necessary to and that have year our cost We scale teams ocean hard other navigate continue and chain advantages, these the

pleased percentage nearly versus of point for situation of we're that an estimated of versus and We're international sales end second-quarter closures increased businesses on store X while on sales resulting XXXX our our globally, sales and and COVID our reopened. In a quarter impacted to basis. all up still the report COVID-related the Janie persistent in quarter, were points. by comp to stores most Permanent of intermix store the XXXX. for turning XX% the approximately QX, X-year financials. monitoring markets, Now, impact carefully sales as X were X% Jack closures and Net divestitures of have the

investments with regardless grew store XX% with experience sales choose us. Enabled quarter. to by omnichannel a as our they growth XXXX in brands contributed of Even business are and getting outsize sales total how customers The our online start XX% engaging continues. capabilities, of online shop to in rebound, versus great the

to to remove SG&A the from primarily quarter our in release, improved the charge will profitability close our to second business drive noted an in which As ultimately UK costs results of related decision the reported and include $XX our structure. and fixed million. press stores Ireland,

by sales brand, on earnings press release. to please details For refer our

reaching expanding the terms gross for American online expansion and ROD of leverage in In high from versus fleet. remaining of benefit strategic renegotiated majority closures XXXX. second-quarter of XX.X%, resulted the the margins, growth, a from basis and the was gross margin rents points store XXX quarter The North historical ongoing

ROD half quarter, directionally During in versus carry the points basis forward trend leveraged to by a of XXX we XXXX, the XXXX. that expect second

versus were we and reduce all and costs shipping improved basis expanded XXX basis primarily significantly versus XXXX merchandise resulting demand, still XXXX growth addition, points due in In to XXX our across discounting averaging of meaningful able higher margins Despite to points. brands, by increased retail margins. online product

SG&A. a XXX was adjusted points XXXX. by deleverage basis, to basis adjusted SG&A points SG&A an On had sales, to XX.X% basis, compared XXXX Turning higher XXX On SG&A. than of basis XX.X% fiscal reported

confidence to partnerships, this the as sales yielded our of basis on of we fund XXX in XXX marketing, and expenses demand the in optimizing work The into strategy demand focused driving long acquisition a for and integrated half, second of we initiatives acutely approximately high-impact driving new we're sales grow benefit, to store celebrity as success evidenced leaned points launch. to we spend seeing, generation drove further six reinvest lean marketing year. full the as growth in XXXX important expenses helping X% to increase brand program profit gives important improved relevance. by into points customer digital margins us like loyalty and the expect the Marketing our on marketing, are In to basis look health QX, about We of down term. fueling

basis to philosophy. accrual strong our in performance addition, pay related for higher In points XXX and financial experienced outlook costs approximately bonus we

margin, Regarding versus the margin Adjusted operating operating operating on a point of XXXX margin. basis. for increased adjusted reported a was margin the the the XXX-basis quarter X.X% operating XX.X%

the As to see take of we're our improved growing sales hold, profitability. the results strategy with through initiatives encouraged

quarter interest. to fiscal The effective tax on expense rate Moving $XX XXXX, XX% interest of was second million. net taxes second-quarter was and the for

Regarding earnings on to $X.XX, the to share $X.XX up QX reported EPS. increase XXXX quarter for per compared Adjusted $X.XX XXXX. per were earnings adjusted to $X.XX an earnings share of were

ended X% to second-quarter for XXXX. compared Turning inventories, inventory up to XXXX and down X%

As supply our ensure part expect fuel our due inventory up to to year. we mid-single. compared mitigate to have to COVID and inventory quarter of important ending are be Double-digits strategy currently chain the advantages growth last holiday we during capacity third within the season, to challenges the impact, scale to sales leveraging we appropriate

Regarding we flow, $X.X equivalents, billion sheet the the investments. and cash quarter ended in and with balance cash short-term cash,

a dilution. quarter program. month, with we ended return through repurchase Earlier third-quarter million We completed repurchases approximately During XXX share of to part shares a share million and Consistent dividend the offset shares year per of our with plan pay in Quarter quarter, this $X.XX. to to million we cash competitive plan to XXX paid $XX dividend dividend this to of shareholders we the $X.XX as will Second up our the outstanding. announced in

as the closed stores plan and and Republic XXXX GAAP our European before turn Finally, America Banana Year-to-date the estate brief a we've plan model. transition part XX operating of update North North progress on of to of America. for we outlook, our closure XXX-store real our our

Old we opened XX XX to plan a Athlete America to in to As XXXX, about a XX Navy year-to-date the and end Old by XXX year. XX expect XX% to stores stores XX close closed openings on Athlete. at of and complete North XX at XX on that XXXX, openings and toward reminder, expected respectively, be and this Navy stores with path

And while deploying of employee in the a to to But our the European the and the projecting due strategy basis. closing drive annual store in Year-to-date. that not UK an online expected XX Regarding an are we're our with in we will to partner France closed close partnership in we we model wind earnings that were will in expected Italy. XXXX accretion still and and move the amplify these stores, the presence, store's market. Ireland. locations benefit of announced by We've to remaining we've we to be discussions the In a September. on strategic down lease-related the end changes back-half business. XX costs short as to stores maintain are term,

the were generated UK context, some half loss. slight at fiscal About European net sales by Ireland these For helpful market in $XXX generated million and sales. of the in stores XXXX, a operating

basis, Now related like year. model which our to changes impact and $X.XX approximately $X.XX financial on full-year a I on the charges totaling adjusted of outlook. and to includes our European the share both the to for an update would recorded of reported non-recurring are Earnings provide range to per outlook providing the operating $X.XX. We're now divestitures expected be to in

$X.XX. sales UK the be that about we to XX% A operating and growth EPS in in range our the XXXX. expected Excluding to incorporates increase adjusted We expect of to This due of closures loss prior guidance. the these to expect to charges, Ireland. of be sales $X.XX versus The now X%. reported store margin $X.XX is

versus operating on goal expected to X.X%, out about in adjusted XXX-basis point Power laid Plan guidance. path the increase XXXX. the prior an of And to is XX% plus us puts our margin a be Our well

benefits times inventories a sizable mitigate and new lead holiday. investments longer our pressures, to balancing against will considered scenarios. the strength, compete well-positioned Carefully of including we outlook, be shipping delays partially back-to-school loyalty and chain brand this and developed supply we number during product program our that the to offerings, in so from related As airfreight inflation near-term to expense and

million the we expenditures, expect year. for capital to full spend Regarding continue approximately XXX to

our Our capacity. strong growth enabling supply high loyalty cash ROIC, sustainable digital investments generation chain strategy. focus sharp in on With and targeting a in is investment we're return

to Athlete. and addition store at Old Navy In growth

forward, following. am the energized As I look by

Navy economy Sonia And open targeting door study with our The and like third in trends our in we're Old and approach services in categories categories addressable of trends the launching that QX. bought and Athlete a we're growth XXXX may working. articulated, in to wellness is quality initiatives of existing rooted Canada and shares the new customer And beyond. is strategic and homebody exciting driving growth new other and growth to

lifetime value. Next is acute customer our focus on

The results With the in personalized program ability and our in based attract the expect early on size increasing million significantly more fall, way. average already we increased customers loyalty and to program soft-launched integrated the July, formal loyalty And purchase launch meaningful to interactive to over program we're of numbers. last from a order higher XX grown members. our has from frequency see

to brand, deliver encourages we've through deep Loyalty become loyalists program relationships In just economics customers universal that program. way better a doubled driving with value. that consumers one our our addition is and multi-brand to building rewards in result within the down stickiness transaction on

our cost results. expansion, into in or to for commitment showing EBITDA Finally, transforming generating the investments fixed the dollars, demands is business

rationalization underway. deeply is fleet Our

of from dollars now of to to the pivot unlocking proven DCs, Operator optimization operations work turn the and investments to Proactively over have brands call using inventory data and costs, also digitization partner developing speed, for the improvements aid our stores increased we is We've I'll in-flight. from our management Our transformation strategy With international and and that, use map in our unlock and enterprise technology technology to trap productivity long-term been the leveraging drive road AI investment amplify smaller growth. in to questions. divested for towards a our begun practices automation the are decision-making. now for to shipping

Operator

your reminder, Thank ladies one please limit a and to gentlemen, questions And per participant. you. Again, [Operator as Instructions].

question Boss JP line Morgan. first the of comes of from Our Matthew

Matthew Boss

and thanks, congrats on strong quarter. really Great, a

Sonia Syngal

you. Thank

Matthew Boss

two-part question. a Maybe

front guess rank And X% First, your versus the Sonia, how at think about back Old XX% XX% double-digit back-to-school so I And inflection that's of half. relative thoughts as Navy, growth I far? well for it XX% in do I we the year, to think drivers you're as comp XXXX, the XXXX. revenue implies more net on seeing. the top-line you Any half or growth sales as the half, on Katrina, then more growth updated front guess, in relative to guidance

your confidence of any the just great. year acceleration be growth So would in revenue drivers half in that back embedded and the

Sonia Syngal

Nice from Matt. hear you. Okay, to

as in that best, XX growth So, first kids market launches and same the something are back-to-school of American at X is in know, demand that just And Old the of think Old a in size this stores matching their prepared I'll women's in offering drivers you Navy Bod year. think And maybe brand's Old in the with a about start and management Navy. we price. model will over as the for online. inventory the that share, families, driving of as right. is with from building into one their biggest of entire a position which brand The we're an be doubles science around in. in component DCs. X% they're those aligned of confident strength. greater supply and first And the back-to-school At together season history, which and And is Gap transformations And their about two as coupled equality its example, happened, to we is hold stores no assortment position that, launch, for as operating the they Navy

confident So, feel three our momentum I drivers, and the think great [Indiscernible]. outlook we quite in and

Katrina O’Connell

is what and to in of core our which exciting the strategy take acceleration really referring dominate. that to you're in categories half, back comes to some revenue the Company we remarks it the heard in market when the is in you what's to us think I continuing in share our prepared And about and

or launch, core maybe, incremental with addressable Athleta. the that for Then combined or Canada then which like all sales So, loyalty those half, lifetime supplemented spend by markets the supplement launch, for which profitable bottom will will us. continues like incremental Athleta drive in kids it also with value categories denim new active drive and value then whether new incremental levers that's entry, the quality value marketing to drive to continued will But baby. and or back

our So, half. growth great initiatives in that's level capabilities it's that and effect really this brand layering driving strength the against of of back

Matthew Boss

Congrats again.

Katrina O’Connell

Thanks, Matt.

Operator

of we to Fargo. question next go Wells from And will Boruchow, Ike our

Ike Boruchow

non-Gap I for on a conference that that. Easy mean, collaboration. said to last us Hey brand was the love specifically of customers, was the I on asking I I Gap hear about the you that then guess have preorders within Katrina, Sonia, mean, XX% interesting pretty Sonia, little months. the few with share I call, bit And think you more more about the to I'd

be And anything the to along launch so, help a else just bit great. would little it's us out more continue or been two with to months got and [Indiscernible] timing you've

Sonia Syngal

Ike. Yes. Sure,

new around many last So, think have folded we the as beginning said new Tokyo, we had in we launched, Gap and We've And those have QX we XX% America, launch you And with to customers in and [Indiscernible] the customers. brand. great being iconic a GAAP of kind products North with pre-ordered the jacket. Europe. in in quarter, response. We'd spoke of of it's

to what with partnership. now, [Indiscernible] a off the the pleased when to We're It's the we of pipeline about have partnership. And and is excited coming. the be strategic we're product we And is customer pleased be partnership. expect so, gate. with this we're the we this we -- long-term it that And product a responses where validating think --

versus we more And coming we don't of be it Twitter so think earnings and will come. our but reveal in the years? much really to or I to more don't there of coolest -- the call that months something, out on that And come

Katrina O’Connell

a versus creative think traditional we process more following it's that process. I say and would Yeah, a

customer the this there also launch seeing of we're And to will and to round They'd leads is incremental the this confidence excitement giving really as in builds. lead a partnership. acquisition so path jacket so the the -- us different potential long-term again, as that and great all

Ike Boruchow

thanks. Great

Operator

Barclays. to And we'll go Yih next Adrienne of

Adrienne Yih

Okay.

have ever transformation I like my Sonia Under right? of and a Katrina, I think speed say, motion. I seen you've correctly. math If don't I've to in set did XX months, one the

congrats. So,

Sonia Syngal

Thanks, Adrienne.

Adrienne Yih

welcome. You're

And on in want less to go. a get promotional. much. So, old quantify each just Banana to can comment on if either the first way I well actually be Gap and of second seems Navy, the I for a -- help it is brands Gap, help can and my Thank and then Banana, growth just are very should going quarter, us the question both you being probably feel to you and those guess and QX getting we AUC all for what watermark three expect quantify And the underway like Katrina, us where is just you have growth high the and AUR - long half. back

Sonia Syngal

[Indiscernible] Let Katrina. over me start to

power. pricing, of terms In

you seeing set, of look mentioned, long realization we runway price We’re as a expansion multiple we margin and of brand that but have the here. ahead at us. we competitive think each If its we years have

of is and the of The store as minimizing I or proven layer bit And mechanism drivers customer These then such the the the value. yields, as we more which the first more right, today. was experience. online drive technology acquisition momentum all we to the fundamentals. a examples and getting The product, we're price we that top program, the return order right? management positioning, say order brand like inventory logic, invest that, experience, in we multiple loyalty marketing, on announced would our know And there. making art to in growth via But drive all as the marketing, or invest are

of we've us ahead I'll to the up prongs multiple it take over realization think rest. we So, of got Katrina and turn price to

Katrina O’Connell

right. I think that's

back Navy the marketing said, deploy in at grow we're or it's next product our we Banana new and we'll year carried compete, have AUR confidence just half driving s whether of to it's optimization. which the capabilities whether year or of categories yield launching Gap it Old that some around health, based on significant continue brand that's everything We we'll in this that the Sonia

in market in And grab back other half than comment outlook us AUC the so to in. to mentioned, money in put I right half inventory that the contemplates able on I'm are spending the that to going and as compete be not back on come AUR we've Sonia our we airfreight half, our to expansion back share confidence All in increases any potential the AUC in say here of from gives airfreight mentioned great would that year. that to the already the continue of we the have

so, that's in all gave contemplated guidance raised And we the today.

so, strategically the see that price us And the quite -- AUR that giving chain we is back-half. opportunity in feel combined the our advantaged elasticity supply and we within can well confident have

Adrienne Yih

of Best luck. Fantastic.

Katrina O’Connell

Thank you.

Operator

our next of Roach question comes Sachs. And from Brooke Goldman

Brooke Roach

merchandise you. confident was pockets for outlook wanted I maybe the of to may how tougher need are much you bit on looking follow level and I the some was taking are to source industry-wide that lot you. of so that is just a holiday little more be question. bit into detail from be pressures. call any product a far wanted there a customer Thank source inventory on for? Good and chain covered in but the afternoon thanks a up in There to and spring. little that supply availability of you'll and or that disruptions, not so to Thank your whether your embedded to for able pressures understand the are What these say,

Sonia Syngal

is answer be that. chain aware may to and happy manufacturing. And supply background We're you in that my

headwinds, few the the have some last And is here so, we months as of advantages. to navigated and

manufacturers have multiple powerful relationships countries across our with origin. of We big,

concerns, as having manufacturing a So, COVID if their which countries able Vietnam, some there's to to country with across we've these shift we're multiple about, like work all read partners needed. of

advantaged have air X advantage, we capacity. Next, booked relationships. months ago. cost We transportation advantage

So, had advantage. we're speed is being we're strategic at tapped capacity, us [Indiscernible] vessel giving here. We that and

together, and all where a chain in then apply you and this So you is supply units scale our year nodes matters. that against the these of billion couple

We But our with Gap over amount time. for of the have first it's we real what's it's vendors And investing a advantage feel our that -- we what certainly, changes environment have be coming. about good will to are navigating from visibility and pay the and in. forecast. we also, least will we be We very on base volatile all real-time to near

Operator

go And to Greenberger Morgan we will of Stanley. Kimberly next

Kimberly Greenberger

think in we if And half could if the remind Thank by you year. percentage you be historically sort about that other of from you color I any half great. chain the sizable outlook of much. back know how us would supply inventory of so about you on just Vietnam Okay, had in magnitude sourced breakdown. in countries. of should great. the airfreight And reallocating the much. any there. a brand, to so Thank you to you would just year the wanted to if be looking question, revenue what on wanted your just you talked increase I you the have have ask back to That

Katrina O’Connell

Sure. Kimberly.

So, we've baby have we with by Navy that strength we Old that [Indiscernible] at don't and and break businesses we we think the actually when half by denim the brand. kids sizable driven as revenue, said, out active But about launching. second the combined quality have

a expect really quality of Simon half, And relationship with incremental momentum Gap at we as the well Navy on so, And is we as holiday. begin online in you with American do continues bottom you're will the the fall fall Gap, season, how Athleta the take is having And from website back their at in I volumes seeing some core, can about and their new imagine, launch. with in very marketing girls' strong I are That's products with take then brands. North into to think entering customer the begin the coming to about Republic, that And and that market. execution start stores its Old Banana think two and talked there. the as the see Vials with Canada a at to as, those also hold traction we

to the we'll think impact better forward, be brand. that to you revenue that'll the but puzzle, XXXX, but there going revenue the what the UK of think that's about by there, are lots then profit how and so. the I Ireland pieces on how to some we lost gave and And think also stores, color see about

haven't we've ago. is it But as are in as about taken that. far of market quantified we costs, air said, six the Sonia And months we the bunch obviously capacity actually -- significant. As a

what evaluating when. capacity that use, actually weekly, we're of hourly, and So, daily, to

remind guidance we evolving have are the inventories So, then the all you really me. scenarios question think a raised possible in updated I gave really it's that and contemplated And today. on to you

Kimberly Greenberger

Vietnam, sorry.

piece country? percentage tours of what either which from historically you to that just last the do before would another to was look year or year Sorry Vietnam inventory relocate --

Katrina O’Connell

with and use for country up country factories factory topflight it's origin, is say for we to the out loss, sourcing that make an accelerated countries we coming closures important of about flow as as Vietnam deal of get to and us, we Vietnam transportation are of able out and example. think I'd a manufacturing any temporary that's day’s

other have product-based Asia, also parts et partnerships Vietnam and that in have America, of strategic India, We Southeast cetera. and Latin

origin that's what's giving across the have impact including our for the to countries impact our move has flexibility with that agility big manufacturers us billion-dollar world, its Hopefully, So, Vietnam. is relationships it navigate we around as COVID helpful. the to the

Kimberly Greenberger

you. Thank Yes.

Operator

conference for ladies today's our does and session and Appreciate conclude question-answer everyone's that participation. today. gentlemen, And

You may now disconnect.

Sonia Syngal

Thank you you end forward of for to the today and look with the at joining quarter. speaking we all third us

The Gap, Inc. (GAP) 27 Aug 212021 Q2 Earnings call transcript